Housebuilder Vistry has issued a profit warning, stating that it expects to report losses after resorting to heavy discounting on unsold properties. The company blamed a slowdown in the housing market and rising construction costs for the financial hit.
Details of the Warning
In a trading update, Vistry said it would take a significant write-down on the value of its unsold homes, leading to an overall loss for the first half of the year. The firm had previously guided for a profit, but now anticipates a pretax loss of around £50 million.
Chief Executive Greg Fitzgerald said: "Market conditions have deteriorated faster than expected, and we have had to offer substantial discounts to move stock. This has impacted our margins and profitability."
Market and Economic Factors
The warning comes amid a broader downturn in the UK housing market, with higher interest rates and inflation reducing buyer demand. Vistry noted that buyer confidence has weakened, particularly in the affordable housing segment, which is a key part of its business.
The company also highlighted that build cost inflation has eroded margins, forcing it to reduce prices on completed homes to generate cash flow. Vistry said it has implemented cost-cutting measures but warned that the outlook remains uncertain.
Impact on the Sector
Analysts have reacted negatively to the news, with shares in Vistry falling by more than 10% in early trading. The warning is seen as a bellwether for the wider housebuilding sector, which has been under pressure from rising mortgage rates and a slowdown in the property market.
Vistry's announcement follows similar profit warnings from other builders, including Taylor Wimpey and Barratt Developments, which have also reported weaker demand and increased cancellations.
Company Response and Outlook
Vistry said it remains focused on reducing its debt and managing its land bank carefully. The company expects the challenging conditions to persist into the second half of the year, but it believes the long-term fundamentals of the housing market remain strong.
"We are taking decisive action to navigate this period," Fitzgerald added. "We will emerge stronger when the market recovers, but we must be realistic about the immediate challenges."
